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ACCC's Rod Sims calls for 'congestion pricing'

Brian Robins

Peak-pricing is being touted as a productivity driver. Photo: Jason South

Along with throwing his support behind the move to sell off more government assets, "congestion pricing" should be on the table in any debate over further economic reform, the head of the competition watchdog Rod Sims is to tell a conference Thursday.

Congestion pricing, which is where charges to use public services are raised at times of peak demand, has been touted for the use of some roads and in other areas, such as electricity, to ensure the most effective use of public assets. It is already used on Sydney's two harbour crossings, with tolls raised during peak hour, for example.

"The reason to privatise assets is to promote economic efficiency," Mr Sims, the chairman of the Australian Competition and Consumer Commission, is to tell a conference on regulation on Thursday.

"With sound regulation the private sector will operate businesses more efficiently as they will have better incentives for, and impose fewer constraints on, performance."

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Unlike other parts of the economy, the country's road network has not had the same focus in the debate over microeconomic reform, he is to say.

"Despite their key role, roads have not been subject to the level of microeconomic reform that has occurred in other industries since the 1990s."

The prices paid by road users do not reflect the economic cost of using roads, nor is there a link between the prices charged to road users and the revenues received by road providers, Mr Sims will say, with decisions about funding investment in roads "often made via political processes rather than by an independent assessment of the relative costs and benefits of a proposed investment".

His comments follow a surge in the profits of toll road owner and operator Transurban earlier this week, thanks to double-digit growth in traffic on some of its prime mid-city assets.

"Australia now has an opportunity to engage in structural reform of road provision and charging, leading to considerable productivity benefits," Mr Sims is to tell the conference.

"All Australians understand why it costs more to rent a beach house in January than July. We just don't call it congestion pricing."

A recent report by the Productivity Commission called for a string of government assets, such as in the electricity industry, to be sold to private operators. It also called for road pricing to be introduced as a means to manage congestion.

"Congestion pricing" could boost efficiencies not just in road transport, but also in the electricity sector and other areas such as trucking freight to ports and at airports in the allocation of take-off and landing slots, Mr Sims will tell the conference.

"The most efficient way to ration or allocate limited capacity and for businesses and governments to receive the right signals about the need for new infrastructure, is for users to face prices that vary according to the supply and demand conditions at their time of use," Mr Sims is to say.

His comments follow comments by the outgoing chairman of the Australian Energy Regulator, Andrew Reeves, who has called for "peak pricing" in the electricity network sector, rather than hiking the fixed charges levied on users.

On Wednesday, the Energy Networks Association, an industry lobby group, released a study claiming consumers would be worse off if the value of the electricity networks was written down. Reducing the size of their asset base - and their charges - would in fact raise costs, it argued.

‘‘Rather than saving money, consumers could pay over $320 million more per year if network investors faced new risks of write-downs,’’ John Bradley, the head of the lobby group said.

“Calls for asset write-downs may seem appealing but this analysis shows it would increase networks financing costs substantially offsetting any other savings for consumers.